11/13/1990 (2)
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TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING
November 13, 1990
The City Commission, meeting as the Board of Trustees of the Employees
Pension Fund, met in regular session at City Hall, Tuesday, November 13, 1990 at
9:32 A.M., with the following members r-~esent:
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Rita Garvey
Lee Regulski
William Nunamaker
Richard Fitzgerald
Sue Berfield
Chairperson
Trustee
Truste~
Trustee
Trustee
Also Present were:
Ron H. Rabun
Milton A. Galbraith, Jr.
Cynthia E. Goudeau
ITEM #2 - Minutes:
City Manager
City Attorney
City Clerk
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Trustee Regulski moved to approve the minutes of the October 29, 1990,
meeting. The motion was duly seconded and carried unanimously.
ointment of Hanson Investment Mana ement Com an as an Additional
er for an estimated annual fee of 100 000.00:
On September 17, 1990, the Trustees authorized staff to begin the search
for an additional Equity Manager, and approved a contract with Callan Associates
to assist in this regard. Callan assisted the Investment Committee in preparing
the II Investment Manager Candidate Profile" and provided the Committee with a list
of six "semifinalists.1I The Committee met with Callan on October 12th and
selected four of the six firms for interview. Interviews were held on October
25th, and the Committee unanimously selected Hanson Investment Management, of San
Rafael, California.
Hanson' 5 investment phi los'ophy is to IIbuy the company, not the stock." In
other words, they only purchase a stock after they fully understand the business
that the company is in. This eliminates investing in IItrendyll or IInew
technology" stocks, and insures the purchase of only leading companies in
IImainlinell industries. The Committee was impressed with Hanson's consistent,
objective, and highly disciplined approach to stock selection. There are never
more than thirty-five stocks in their portfolio, and each stock must pass at
least nine of twelve well defined selection criteria.
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For the ten year period ending June 30, 1990, Hanson's composite annual
return was 19.78% per year, which significantly exceeds the Standard and Poor's
500 return of 15.89% and the Callan database median manager return of 17.02%.
Similar relative results were achieved consistently within that period, with very
little fluctuation in relative performance from year to year. While past results
are never a guarantee of future performance, the Committee was impressed with
PFM 11/13/90
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these performance statistics accompanied by an apparently consistent adherence to
their investment philosophy.
. Hanson currently manages more than $800 million for twenty-five tax-exempt
clients. Other municipal clients include the City and County of San Francisco,
the City of Miami, and the State of Hawaii. Hanson limits each portfolio manager
to a maximum of ten clients, insuring high quality, personalized client
attention. The Investment Committee believes that Hanson's investment style and
philosophy will appropriately complement our two existing equity managers, and
provide a needed diversification of equity assets.
We are proposing to allocate $20 million to Hanson. Of this amount, $4
million will come from the Pension Plan's equity in the consolidated cash pool
and the remaining $16 million will come equally from the two existing equity
managers. With approval to proceed, the existing managers will be given until
December 15th to liquidate holdings at their discretion to complete the asset
transfer. The Investment Committee and Investment Advisor will monitor the
process and assist as necessary.
This will leave approximately $3 million in the cash pool which would
otherwise be invested in GIC contracts. Because we are experiencing some
difficulties with our current GIC manager as a result of the recent First Union
purchase of Florida National Bank, we intend to purchase Treasury securities in
house until such time as the Investment Committee can formulate a proposal for
fixed income portfolio management.
Hanson's fee for management services will be 0.5% of the first $25 million
under management and 0.375% of all assets over $25 million, consistent with the
fees paid to the two existing managers. The estimated annual fee for a $20
million portfolio is $100,000, which, because of the graduated fee schedule, is
approximately $25,000 more than the fee that would be paid to the existing
managers. The Investment Committee believes, however, that the increase is
warranted and appropriate to provide the additional level of diversification.
Questions were raised regarding the cost and timing of the existing
investment managers liquidation of $8,000,000 of their assets. Dan Deignan,
Finance Director, indicated cash would be transferred to Hanson and that he did
not feel any "windows" would be missed due to timing.
In response to a question Mr. Deignan indicated the option for us to
terminate if the two individuals we are dealing with should leave the firm is to
the City's advantage. Also in response to questions he stated that the fees are
calculated monthly but paid quarterly and that our portfolio will be the same as
Hanson's.
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Trustee Fitzgerald moved to approve the Investment Management Agreement
with Hanson Investment Management Company of San Rafael, California, at an
estimated annual fee of $100,000, and authorize an initial allocation of $20
million, $4 million to come from the Pension Plan's equity in the consolidated
cash pool, and the remainder to come equally from the two existing equity
managers and that the appropriate officials be authorized to execute same. The
motion was duly seconded and carried unanimously.
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AGENDA
Board of Trustees of the Employees I Pension Fun_, ,
November 13, 1990
9:30 A.M.
1. Call to order 1. 9:32 a.m.
2. Approval of Minutes 2. Approved as submitted.
of 10/29/90
3. Appointment of Hanson Investment 3. Approved.
Management Company as an
Additional Equity Manager, for
an estimated annual fee of
$100,000.00
4. Other Business: 4. None.
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5. Adjournment: 5. 9:44 a.m.
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